Monthly income from £140,000

jem16

EdInvestor wrote:

As I said before, if you think the information published on the website of the Financial Services Authority specifically for the guidance of consumers is not factual, then you would be best to tell the FSA that.

Exactly where did I say the FSA information wasn't factual?

My reply to providing factual information was in reply to this statement by you.

EdInvestor wrote:

We can't know - all we can do is deal with those that take part.

Unless of course you are the FSA?????

I think most people actually find it quite an interesting indicator that advisors make such a fuss about this information whenever it is mentioned.

Clue is in the word "think"

dunstonh

The "fuss" as you call it is made because you use that information out of context and post it in almost every thread you can.

In this case, you have used it to measure investment bonds as an example of a high charge contract. Yet in the pension forum you "recommend" to virtually everyone that they take out a SIPP. A SIPP is usually the most expensive pension option. Yet in there you suggest people use low cost distribution channels. Yet when it comes to investment bonds you make no mention of low cost channels and continue to post the FSA tables which highlight full cost versions.

It also has to be said that the tables are not the most reliable. If you buy a product with L&G on it, you could be getting pricing from 4 or 5 different versions. Yet which versions are in the tables? As an IFA, I can source the L&G investment bond from two places and get the same bond on different terms. Both of which are cheaper than the bank's that sell L&G products.

Investment bonds also get cheaper as the premium increases. A 25k bond would be expensive, even on NMA terms, and damned difficult to justify against OEICS. A 50k starts getting closer and 100k upwards it becomes quite easy. Indeed, one provider has recently amended their bond to give fund based discounts and their RIY gets really low on large fund values. You dont see that reflected in the tables. That same bond comes out mid table on low amounts but top of the pile on large amounts.

EdInvestor

No I'm not the FSA, what a thought.

I'm amazed this thread is being prolonged, given the incredibly bad light in which it shows up the investment bond,which is supposed to be a product beneficial for higher rate taxpayers. I don't normally bother with their concerns as I figure they can usually take care of themselves, and because many of the problems arise because basic rate taxpayers are being flogged stuff which is really suitable for those on higher rate.

Of course I have argued for some time that IBs are not suitable for those on basic rate.So imagine my surprise when after all that calculation we discover that in order fpr a higher rate taxpayer like jem to derive any benefit from it, it's necessary to grind the IFA down to a charges deal lower than the standard for a tracker fund, the ultimate cheapo product.

Less than a third the charge on a stakeholder pension, another supposedly cheapo product.:eek:

Although there is a miniscule benefit at this very cheap level ( of 162 quid a year on a 100k investment), at the charges levels normally prevailing, the investment bond is likely to be uncompetitive for many higher rate taxpayers as well.

So I think they'd still better be equipped with the knowledge of what these industry charges are in the first place, as the jem experience can hardly be called mainstream.

[Edit] And if it is as DH asserts in his post referring to large amounts, then why don't you get the FSA to amend the IB tables, which currently only go up to 25k?
It is very clear that people are putting much larger lump sums into these products. Those tables are at least 4 or 5 years old now, so an update on amounts would be appropriate.

jem16

EdInvestor wrote:

No I'm not the FSA, what a thought.

I'm amazed this thread is being prolonged, given the incredibly bad light in which it shows up the investment bond,which is supposed to be a product beneficial for higher rate taxpayers.

I must be reading a different thread from you.

Of course I have argued for some time that IBs are not suitable for those on basic rate.So imagine my surprise when after all that calculation we discover that in order fpr a higher rate taxpayer like jem to derive any benefit from it, it's necessary to grind the IFA down to a charges deal lower than the standard for a tracker fund, the ultimate cheapo product.

Back to charges again......... Ignoring the rest of the information again ........

jem16 wrote:

However I must admit to having doubts

Doubts confirmed :sad:

dunstonh

I'm amazed this thread is being prolonged, given the incredibly bad light in which it shows up the investment bond

Like Jem, I must be reading the wrong thread. This thread has been an example where the Inv Bonds are suitable.

So imagine my surprise when after all that calculation we discover that in order fpr a higher rate taxpayer like jem to derive any benefit from it, it's necessary to grind the IFA down to a charges deal lower than the standard for a tracker fund, the ultimate cheapo product.

It is possible to get an RIY of 1% currently on investment bonds with full commission taken. Internal funds only, like a stakeholder, but still possible. Dont think i would want my money there but if cheap is what you want, then its available.

Although there is a miniscule benefit at this very cheap level ( of 162 quid a year on a 100k investment), at the charges levels normally prevailing, the investment bond is likely to be uncompetitive for many higher rate taxpayers as well.

You keep focusing on the charges but have ignored the tax and benefits that would be lost if the OPs mother went with your suggestion. You also have no evidence to support that statement. If the RIY is lower than the equivalent unit trust funds then the charges are going to be lower. The two things go hand in hand. You cant have high charges but a low reduction in yield.

And if it is as DH asserts in his post referring to large amounts, then why don't you get the FSA to amend the IB tables, which currently only go up to 25k?

Its an interesting point but it just goes to show how unreliable your datasource is if it only allows a 25k example. I wouldnt do a bond for 25k. It just isnt cost efficient. The charging structures are not geared to make the product competitive at 25k. However, ramp up the amounts and it certainly does. How you can expect to measure an investment bond that has fund based discounts on investments over 100k on a generic calculator that only goes to 25k?

Of course, you never let the facts get in the way of a bit of anti financial services bashing do you ed?

oldfella

fascinating thread - can someone tell me who won ?

my only observation is the financial industry needs to introduce products that are more transparent than an IB seems to be

Mike

dunstonh

my only observation is the financial industry needs to introduce products that are more transparent than an IB seems to be

Most are fine and dont need altering. A few do have multiple charging layers which can confuse. Things like fund based discounts reward higher contributions and that can distort things but that is nothing new and occurs on savings accounts and no-one seems to moan there.

After look at many savings accounts and you will see the £1-£5000 interest rate looks pretty poor compared to the £100,000 rate.

The confusion comes from the way certain individuals post their opinions despite not knowing the correct taxation, charges and benefits of the product.

fascinating thread - can someone tell me who won ?

You read it (you deserve a prize for keeping up!). Do you prefer the factual data or inaccurate information that continued to be repeated despite evidence to the contrary?

..hmm. On this forum, facts dont always count for much as its often the one that shouts the loudest and sounds fashionable and that tends to win

oldfella

Most are fine and dont need altering.

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I think you misunderstood - its my opinion that based on what I read, its almost impossible to understand charges and benefits - you might think differently, but it isnt going to change my opinion.

Mike

Chrismaths

I think that IB charging structures can be opaque and 'sneaky' - but to say they are 'impossible' to understand and that you won't change your opinion is tantamount to saying "I refuse to think for more than 2 seconds and therefore it's the IB's fault".

Look at mortgages - when you decide what mortgage you want, you have to balance interest rate, offer period, fixed/variable, flexiblitity, portability, redemption penalties, booking fees, higher lending charges, valuation fees etc etc - but people manage it. Just because you can't be bothered to understand something doesn't necessarily make it "bad".

oldfella

Just because you can't be bothered to understand something doesn't necessarily make it "bad".

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thats an assumption - I read all the postings and in my opinion there is a degree of opaqueness in these products that makes them unattractive for me.

I never said there were bad - just they seem to have a level of complexity once you start asking questions which in my experience is usually hiding things the supplier doesnt want you to know

"cant be bothered" is a judgement on your behalf which is not very gracious.

I would reject with-profit policies and avoided Endowments for the same reason.

Mike